Maand: april 2021

Too much of a good thing? Financially insecure employees and automatic enrolment into workplace pensions

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Too much of a good thing? Financially insecure employees and automatic enrolment into workplace pensions

I finally read the paper; also see previous thread on @Netspar presentation by Jonathan Cribb

"Automatic enrolment could have a significant downside by encouraging people to save for retirement when they could significantly benefit from higher spending in working life or from repaying debts"

Which types of people may want to opt out of saving for retirement?

1⃣low incomes; high current marginal utility of consumption
2⃣replacement rate from state support in retirement is much higher for the lifetime low income
3⃣pay off debts first, rather than saving in a pension

We find that under automatic enrolment there is essentially no difference between the pension participation rates of people who are in severe financial difficulties on our multidimensional index (94%) compared to those who are much more comfortably off

High participation rate of groups w/ several financial difficulties➡️ Make opt-out process easier and/or more prominent could be beneficial?

Some of those people in severe financial difficulties now are likely to be over-saving for the retirement, as least at this point in time

Studies have argued that the vast majority of households have accumulated as much, or more, wealth than is implied to be optimal by a life cycle model
(see Scholz et al 2006 https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.365.911&rep=rep1&type=pdf;
Crawford and O’Dea 2020 https://onlinelibrary.wiley.com/doi/pdf/10.3982/QE725)

Before auto-enrolment ➡️ After auto-enrolment
Least secure (~12% of population): 26% ➡️ 94%
Most (financially) secure: 72% ➡️ 95%

Difference between least & most secure: 46 %points ➡️ 1 %point

Automatic enrolment has massively increased workplace pension participation of the least financially secure employees.

Now just as likely as the most financially secure employees to be members of a workplace pension plan.

This is potentially worrying, given that these [least financially secure] employees may be better off opting out of the workplace pension plan they have been automatically enrolled into in favour of higher take home pay (and higher financial security in the present). p22

Most of the boost in participation rates is being driven by increases in participation rates of the ‘right’ kind of groups of targeted employees, though a fifth is being driven by the group we are more worried about (p25)

Any adjustments made to automatic enrolment policies aimed at increasing the opt-out rates for those in financial distress

may need to be traded off against potentially reducing effectiveness of AE at boosting pension plan participation for more financially secure people

see matrix in this @AutoriteitFM report 2018
Should opt-out, does not op-out corresponds orange quadrant B;
Opts-out, should not opt-out is red quadrant C

Both are suboptimal, but different types of "errors", how to weigh B vs C is normative/subjective

https://www.afm.nl/nl-nl/nieuws/2018/sep/keuzevrijheid-pensioendeelnemers

Conclusion
Auto enrolment has substantially increased (by 68 percentage points) pension participation rate of financially insecure employees (comprising 12% of the targeted population)

who tend to have little/no liquid savings, and low income and/or high material deprivation

Many of these financially insecure employees might be better off leaving the workplace pension plan they have been automatically enrolled into in favour of higher take home pay – even if it is just temporarily p27

Possible policy responses:
🔹Make the opt-out process more salient and accessible
🔹Target low-earning employees or those in arrears, that they may favour opting out
🔹Increase the level of earnings at which people have to be automatically enrolled

Any of the suggested policies would have to be implemented carefully, to avoid substantially increasing opt out among those who are more financially secure and who therefore likely should remain members of the workplace pension plan they have been automatically enrolled into
p28

(as an aside, I also read a paper today on how to deter people from opting-out; https://twitter.com/wilte/status/1382998015313645568)

Oorspronkelijk getweet door Wilte Zijlstra (@wilte) op 16 april 2021.

Externe mindset (Outward Mindset) – Arbinger Institute

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[in Nederlands gelezen] [Goodreads, Book page]

Aardig model, met goede visuals. De case studies/voorbeelden vind ik niet allemaal even sterk en worden redelijk veel herhaald en uitgesponnen. Prima boekjes, werkt waarschijnlijk het best in een training met concrete oefeningen en discussie. De plaatjes-in-kleur zijn afkomstig van slides van een trainingsochtend.

SAM [See Others – Adjust Efforts – Measure Impact] is in het Nederlands ABI [Anderen Zien – Bijstellen – Impact meten]

Mindset model

‘Dat is het verschil tussen de managers die een ommekeer teweeg kunnen brengen en degenen die dat niet kunnen. Succesvolle leiders zijn degenen die nederig genoeg zijn om verder te kunnen kijken dan zichzelf en die de ware capaciteiten en vaardigheden van hun mensen zien. Ze doen niet alsof ze overal een antwoord op hebben.

Een externe mindset stelt mensen in staat na te denken over het collectieve resultaat en zich te gedragen op een manier die dat resultaat oplevert.

Met een externe mindset sta ik open voor andere mensen en hun belangen en doelstellingen, en vind ik deze belangrijk. Ik zie anderen als mensen die ik kan helpen. Met een interne mindset daarentegen keer ik anderen de rug toe. Ik maak me niet echt druk over hun belangen en doelstellingen.

Iemand met een interne mindset richt zich op wat hij nodig heeft van anderen om zijn doelstellingen te bereiken. Hij maakt zich voornamelijk druk over de impact van anderen op hem en niet over zijn impact op anderen.

Externe Mindset toepassen

Echte hulpvaardigheid kun je niet in een formule gieten. Het hebben van een externe mind set betekent niet dat mensen zich op een bepaalde voorge schreven manier moeten gedragen. Nee, het betekent juist dat wanneer mensen oog hebben voor de belangen, problemen, wensen en menselijkheid van anderen, ze op dat moment zien wat de effectiefste manieren zijn om hun gedrag aan te passen. Wanneer ze anderen als mensen zien, reageren ze op een men selijke en hulpvaardige manier. Ze passen hun gedrag op een natuurlijke manier aan als reactie op de behoeften die ze om zich heen zien. Als je een externe mindset hebt, is het aanpas sen van je gedrag een logisch gevolg van het feit dat je anderen op een nieuwe manier ziet. (p91)

[Deze alinea begreep ik niet, ik vermoed deels door de vertaling. Wat betekent “als je het mij vraagt, ben ik het probleem”];

Het principe dat je moet toepassen is: ‘Als je het mij vraagt, ben ik het probleem.’ Het moet bij mezelf beginnen. De reactie van anderen is grotendeels afhankelijk van wat zij in mij zien. De belangrijkste stap die ik moet zetten, is het zetten van de belangrijkste stap. (p106)

Ik hoef als leider niet de oplossing voor elk probleem te hebben. Tegen mensen die een probleem aan jou voorleggen, moet je kunnen zeggen: “Hm, dat klinkt als een lastig probleem. Ik hoor graag van je hoe jij denkt dat we dit moeten oplossen.” (p128)

Niettemin is het zo dat als je van je organisatie te horen krijgt dat je met een externe mindset moet functioneren maar je juist wordt beloond wanneer je een interne mindset hebt, de per verse prikkels onweerstaanbaar kunnen zijn. Een van de meest voorkomende hindernissen voor een externe mindset zijn naar binnen gerichte targets voor succes. (p144)

Hoe nu verder?

Entangled Life: How Fungi Make Our Worlds, Change Our Minds & Shape Our Futures by Merlin Sheldrake

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Entangled Life: How Fungi Make Our Worlds, Change Our Minds & Shape Our Futures by Merlin Sheldrake
⁦@MerlinSheldrake⁩

https://www.goodreads.com/book/show/52668915

https://twitter.com/merlinsheldrake/status/1275475741682122753

Shaggy ink cap mushrooms, Coprinus comatus, drawn with ink made from shaggy ink cap mushrooms (by @collin_elder)

I've imagined this book to be a portrait of this neglected branch of the tree of life, but it's more tangled than that.

It is an account both of my journey towards understanding fungal lives, and of the imprint fungal lives have left on me and the many others

Chapter 1️⃣

In France, Saint Anthony – the patron saint of lost objects is regarded as the patron saint of truffles, and truffle masses are celebrated in his honour.

the split gill fungus, Schizophyllum commune, has over 23,000 mating types, each sexually compatible with nearly every one of the others

Chapter 2️⃣

Darwin: Intelligence is based on how efficient a species becomes at doing the things they need to survive

Many types of brainless organism respond to their environments in flexible ways, solve problems and make decisions between alternative courses of action

Ch 3️⃣

Schwendener: lichen fungus (known today as mycobiont) offered physical protection; acquired nutrients for itself & for algal cells

Algal partner (photobiont, a role sometimes played by photosynthetic bacteria) harvested light and CO2 to make sugars that provided energy

‘You see', wrote the English mycologist Beatrix Potter, best known for her children's books, 'we do not believe in Schwendener's theory.' (p81)

In joining forces, the fungal partners became part photobiont, and the photobionts part fungus. Yet lichens resemble neither.

Just as the chemical elements of hydrogen and oxygen combine to make water, so lichens are emergent phenomena, entirely more than the sum of their parts

As Goward emphasises; I often say that the only people who can't see a lichen are lichenologists. It's because they look at the parts, as scientists are trained to do. The trouble is that if you look at the parts of the lichen, you don't see the lichen itself

a lichen is one of the principal ingredients in the spice mix garam masala.

https://en.wikipedia.org/wiki/Garam_masala

Chapter 4️⃣ Mycelial Minds

And an ant's death grip is part of the outward expression of the genome of Ophiocordyceps fungi (Dawkins’ extended phenotype)

Chapter 5️⃣

>90% plants depend on mycorrhizal fungi (mykes=fungi, rhiza=roots)

Plants pack up light and carbon dioxide into sugars and lipids. Mycorrhizal fungi unpack nutrients bound up in rock and decomposing material.

Mycorrhizal fungi can provide up to 80% of a plant's nitrogen, and as much as 100%of its phosphorus. Fungi supply other crucial nutrients to plants, such as zinc and copper.

In return, plants allocate up to 30% of the carbon they harvest to their mycorrhizal partners.

In parts of a mycelial network where phosphorus was scarce, the plant paid a higher 'price', supplying more carbon to the fungus for every unit of phosphorus it received.

Where phosphorus was more readily available, the fungus received a less favourable 'exchange rate'.

The 'price' of phosphorus seemed to be governed by the familiar dynamics of supply and demand.

Whiteside, @KiersToby (2019)

https://www.sciencedirect.com/science/article/pii/S0960982219304907

The fungus was able to transfer a greater proportion of its phosphorus to the plant at the more favourable 'exchange rate', thus receiving larger quantities of carbon in return. #buylowsellhigh (p152-153)

Lessons from fungi on markets and economics |
TED talk 2019 Toby Kiers

Mycorrhizal associations born of the Anthropocene will determine much of humans' ability to adapt to the worsening climate emergency. Nowhere are the possibilities – and pitfalls – more apparent than in agriculture.

Intensive farming practices – through a combination of ploughing and application of chemical fertilisers or fungicides – reduce the abundance of mycorrhizal fungi and alter the structure of their communities.

Chapter 6️⃣ Wood wide web

Mycorrhizal networks have an important ecological role

Simard (1997) 6% Carbon 🌳 ➡️ 🌲 via fungi

2106 study: 280 kg of carbon per hectare of forest could be transferred between trees via fungal connections; 4% total carbon/yr pulled out atmosphere

Mycoheterotrophs: dependent on fungus for nutrition, don’t make own energy. All ~25,000 orchids are

Diverse portfolio of plant partners insures fungus against death of 1 of them

🍄 brokers of entanglement mediate interactions btwn plants according to their own fungal needs
p179

Many of the researchers I have talked with share the view that plant communication through fungal networks is one of the most compelling aspects of mycorrhizal behaviour.
(p183)

Chapter 7️⃣ Radical Mycology

White rot fungi (eg Shiitake) can break down the lignin in wood.

Non-specific enzymes (peroxidases) release a highly reactive molecules, 'free radicals', which crack open lignin's tightly bonded structure in a process known as 'enzymatic combustion'

Fungal decomposition – much of it of woody plant matter – emits ~85 gigatonnes of carbon to the atmosphere every year

In 2018, the combustion of fossil fuels by humans emitted ~10 gigatonnes

Paul Stamets TED2008
6 ways mushrooms can save the world

Radical Mycology: Training a Mushroom to Remediate Cigarette Filters

Stamets et al (2018) Extracts of Polypore Mushroom Mycelia Reduce Viruses in Honey Bees

https://www.nature.com/articles/s41598-018-32194-8

Chapter 8️⃣ Making Sense of Fungi

The Linnaean system of taxonomy was designed for animals and plants, and doesn't easily cope with fungi, lichens or bacteria.

Against the naming of fungi – N. Money (2013)

https://www.sciencedirect.com/science/article/pii/S1878614613000871

The dominant narrative of evolutionary theory was one of conflict and competition.

Mutualistic relationships, such as those that give rise to lichens, or plants' relationships with mycorrhizal fungi, were curious exceptions to the rule
p234

Final story in the book: making cider from Newton’s apple tree (from apples & yeast on them) and calling it Gravity

Oorspronkelijk getweet door Wilte Zijlstra (@wilte) op 5 april 2021.

A Preference for Costly Disclosures

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Abigail Sussman (@abbysussman) delivered a talk entitled, “A Preference for Costly Disclosures” in the Data Colada Seminar Series on April 2, 2021.

More on Buell’s work and Operational Transparency: Improving Customer Compatibility with Operational Transparency

Are there cases when people prefer complex price disclosures even when those disclosures cost them?

Preference for Costly Complexity

Experiment with prepaid cards. People prefer the disaggregated fee disclosure (on the right) over the consolidated fee disclosure (left side)

But: respondents make way better decisions (i.e. choose the cheaper/better card) with consolidated disclosure (i.e. the version only 30% preferred):

No self-selection; there were no differences in recognizing the best card between groups who preferred consolidated or dissaggregated fee disclosure:

Experience did not help out a lot; in a second round respondents still choose the more expensive/worse option more often in the disaggregated condition compared to the consolidated condition. Possible explanation: respondents are quite confident they are able to choose the lower fee option.

Intervention?

Explaining all the pricing tricks (see slide below) did lead to significant drop in preference of dissagregated fee disclosure, from 70% to 54% (note that majority still prefers the disaggregation). And in the selection task, about 7% of respondents with consolidated information picked the higher-fee card, compared to about 23% for the disaggregated info.

A solution: even more (simplyfing) information

Combo disclosure, combines preferences for more details (all items specified) and computational ease (easy (sub)totals)

Respondents like/prefer the combo disclosure (the preference was for the combo disclosure, then the disaggregated, and then the consolidated)

The Combo performs similar to the Consolidated disclosure and better than the dissagregated disclosure:

Conclusions

And so one of the things that we learn in terms of how we can deal with this is that educating customers is unlikely to be helpful and instead this speaks to regulating disclosures and provides even more support for not only simplifying but giving people enough information that they feel good about the simplified disclosure.

Further reading

A Preference for Error-Inducing Price Complexity OSF: https://osf.io/xq39b/?view_only=b33063eb868a48b082cc993e8a853363

When Shrouded Prices Seem Transparent: a Preference For Costly Complexity (extended abstract, 2019)

When Shrouded Prices Signal Transparency: Consequences of Price Disaggregation. PhD Thesis (2020) Shannon White

Summary: This dissertation identifies cases when most consumers both prefer to see more detailed price disclosures and fail to identify lower-fee options when disclosures are more detailed. This effect is driven by perceptions that detail signals transparency, as well as overconfidence in one’s ability to add fees. Consequently, firms can obfuscate total prices while appearing transparent.

The results of this dissertation suggest that consumers like the information in complex disclosures but commit computational errors while believing they will not. Even after experience or when warned, they maintain preferences that may affect the consumer decision making process and ultimately cost them.

Improving Customer Compatibility with Operational Transparency

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Voluntarily marketing downsides of a credit card (Operational Transparency):

  • Insignificant effect on acquisition
  • Customers spend 9.9% more per month
  • 20.5% less likely to cancel card
  • 10.8% less likely to make late payments

Providing transparency into an offering’s tradeoffs may be an effective strategy for informing customer choices, leading to better outcomes for customers and firms alike.

Background

Builds on a growing literature that demonstrates how voluntarily revealing facets of an operation that are traditionally kept hidden may in some cases improve outcomes for customers and service providers alike (Buell et al. 2017, Mohan et al. 2020).

In this paper, we define tradeoff transparency as voluntarily marketing the downsides of an offering with similar emphasis as its corresponding advantages.

To the extent that disclosing sensitive information can adversely affect demand, [some] results suggest that firms intent on acquiring new customers may have powerful incentives to hide negative information from prospective buyers.

When companies self-disclose their costs of producing goods and services – a practice which implicitly reveals their profit margins – consumers report trusting the firm more, are more willing to engage with it, and sales increase (Mohan et al. 2020). Furthermore, research on operational transparency has demonstrated how showing the otherwise-hidden work being performed behind the scenes in an operation – can enhance consumers’ appreciation for the firm and their perceptions of the value it creates.

Providing prospective customers with tradeoff transparency could improve customer compatibility in two ways:

  • Reducing Type I errors (false positives); a customer chooses an offering that is poorly aligned with his or her needs.
  • Reducing Type II errors (false negatives); when a customer fails to select an offering that is well-aligned with his or her needs.

Experiment

Commonwealth Bank of Australia (CBA) offers 9 different credit cards. From Sept 2017 – Feb 2018, 466,322 customers were randomly assigned to one of two experimental conditions (389,611 used for analysis).

Customers randomly assigned to the control condition observed a version of the website that was consistent with the bank’s traditional marketing efforts – emphasizing the features and benefits of each credit card in its primary copy. Customers randomly assigned to the treatment condition observed an augmented version of the website, in which the primary copy additionally revealed the tradeoffs inherent in each offering.

Not on mobile banking application, but roughly 80% of new credit card applications that came in through digital channels came via a public-facing website or the secure online banking website (RCT ran on both these websites).

Results

Tradeoff transparency may not harm acquisition rates

Voluntarily providing customers with transparency into an offering’s tradeoffs may not harm rates of acquisition; no large differences between treatment and control in all six stages of acquisition funnel. Providing prospective customers with tradeoff transparency may have an insignificant effect on overall rates of acquisition.

Midway through period of experimentation, the bank publicly announced a promotion, offering $300 cash back to customers who opened a credit card in the Low Rate family and spent $1,000 in purchases with the new card within the first 90 days of activation. The announcement was broadly supported by advertising (e.g., television, radio, and print). Promotion did lead to higher acquisition (dotted lines are above non-dotted lines); number of new credit card accounts opened per day went up by 47.3% during the promotion period.

Tradeoff transparency may lead to better long-run outcomes for customers and firms

Customers who were randomly-selected to experience transparency into each offering’s tradeoffs, and who moved forward in opening an account, used their cards more intensively, spending 9.9% more per month, and were 10.8% less likely to make late payments on a monthly basis. Furthermore, customers who experienced transparency were 20.5% less likely to cancel their credit cards during the first nine months of their relationships.

To the extent that heightened engagement and retention are behavioral indicators of a better customer experience, and a more profitable service relationship, these results suggest that providing transparency to prospective customers may be mutually beneficial.

During the initial six months of their relationships, customers who experienced tradeoff transparency were 10.8% less likely to make late payments on a monthly basis. These results provide evidence that being more transparent with customers – not just about an offering’s advantages, but also about its tradeoffs – can help customers make choices that lead to better long-run outcomes for customers and firms alike.

There may be a tradeoff between acquisition and retention-based strategies

Traffic to the credit card website increased, and the conversion rate of browsers to buyers was enhanced, such that the number of new credit card accounts opened per day went up by 47.3% during the promotion period.

However, customers acquired during the promotion spent a third less on a monthly basis, due in part to the fact that they were 3.8 times more likely to cancel their cards during the initial months of their relationships than those who were not acquired through a promotion.

Tradeoff transparency is especially effective for customers who have prior category experience

Promotions may crowd-out the benefits of providing prospective customers with tradeoff transparency

Conclusion

Conventional wisdom and common practice dictate that service firmsshould emphasize the advantages of their offerings and downplay the tradeoffs when marketing to prospective customers. We suggest that taking a different approach – providing transparency into both an offering’s advantages and its tradeoffs, in order to help customers make more well-informed decisions – can lead to better outcomes over the long run for everyone involved. We hope that the present work will lead to more research in this area, and influence practice, in order to foster better customer experiences, and more engaging and profitable service relationships among customers and the organizations that serve them.